E-way bill – Expressway or congested road?

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As we all may remember, when GST was implemented, all the check posts were rendered ineffective. GST was supposed to end these interstates checking bottlenecks and ensure smooth and faster transportation. With the onset of GST and its initial teething problems, the e-way bill was deferred. With further technical issues and improper implementation of GST, the whole chaos led to deferring of time line for e-way bill. Although, the Group of Ministers (GoM) had planned April 1st, 2018 as the rollout date, but slipping GST revenue collections and possible tax evasion methods have forced an early implementation of e-way bill from Feb 1st, 2018.

What is an e-way bill?

As per CGST rules - Every registered person who causes movement of goods of consignment value exceeding fifty thousand rupees, “information is to be furnished prior to the commencement of movement of goods and is to be issued whether the movement is in relation to a supply or for reasons other than supply”. Till now, the states had their own versions of the e-way bill. Now a single transit pass will work throughout India. Although e-way bills for intra state movement will be introduced from June 1st, 2018.

E-way bill is a mechanism to ensure compliance with the laws while transportation of goods. The objective is still the same of keeping a check on tax evasion.

How is it different from earlier way bills or entry tax?

Way-bill/entry tax has been there in the country since the days of VAT and Service Tax i.e. almost 2 decades. There are quite a few differences in terms of how it is better from its predecessors.

One is, this e-way bill will be valid throughout the country instead of different way bills/transit pass for each state.

Another benefit is, that the e-way bill is to be verified once only by tax officer during the movement of the goods. This plugs in loopholes as corruption was rampant throughout.

E-way bill also facilitates filing of GSTR-1 return, as the return gets auto populated on the basis of the details furnished in the e-way bill.

Pushing through digital India, the e-way bills can be generated through smartphone and can be sent via SMS too. This helps in intra-state trading.

Under GST, a seller can now issue multiple e-way bills in case of multiple consignments if the amount exceeds the threshold, which was a cumbersome process previously.

With e-way bill, there would be almost minimal waiting time at the check posts, ensuring faster movement of goods. Also, the transporters have the power to raise complaint in case the vehicle is detained for more than 30 minutes.

But…

There are many concerns in the minds of the business class people. All are wary of the experience during the earlier tax regime. Even though there will be only a single e-way bill valid throughout India, but in the previous tax regime these way bills or entry tax booklets were issued manually by tax authorities which resulted in increased corruption, which resulted into higher costs and delays.

Also, after the horrendous implementation of GST, and the continuous amendments, the people are wary that it would increase compliances and it would be a barrier for ease of doing business. Another issue is that only 14 states will be implementing e-way bill from Feb 1st, 2018. This would create more confusion and hurt inter-state sales.

Another issue is that the government wants the e-way bill to act as a barrier for tax evasion, but the transporters will be on the line of fire because they won’t be equipped with adequate information or knowledge whether the consignee has declared the true value of the goods.

Another major issue to come up will be for the unregistered dealers. The unregistered dealers and dealers under the composition scheme also are required to use e-way bills for transportation. The limit of INR 50,000 also brings a lot of small players under the ambit of e-way bill. Although they are not under GST, but the compliance cost would be incurred anyways due to this. It becomes difficult for the small players, as this would increase the cost of transportation, leading to lower margins and tough competition putting their survival in danger.

The business class is also concerned whether this is a hasty implementation like GST or the government has adequate preparedness.

What ahead?

As we all can now understand, the government had limited window and options given the dwindling revenues from GST in the past few months. So as one of the tax evasion prevention measures, e-way bill system was going to be implemented anyways. The purpose is to establish an audit trail of the movement of goods so as to prevent misuse of the law.

The trial run has already begun in a few states. And the overall benefits have increased as compared to the old system of the way bills. Although the government claims that the e-way bill portal can process approx. 50 lakhs e-way bills per day.

The government needs to consider any necessary amendments to be taken into effect during the trial run period as this would help them reducing the teething problems.

We hope that the implementation is smooth and easy as the government plans, but the businesses should brace themselves for any disruption that might come their way.

The concerns like adequate preparedness, hassle free implementation become more vital as the government needs to understand that the economy is already reeling under GST stress and if this goes wrong, this might just become the worst nightmare for this government.